This paper examines a natural experiment in which Washington State teachers were offered the opportunity to choose between enrolling in a traditional defined benefit (DB) plan and a hybrid plan with DB and defined contribution (DC) components. We find plan preference is weakly related to estimates of the relative financial benefits of being in either the DB or hybrid system and strongly related to teacher age. Importantly, we also find that the majority of teachers prefer the hybrid plan, and that teachers opting into the hybrid plan tend to be more effective based on student output measures of teacher productivity. These results suggest that policy shifts toward pension systems that include DC options do not necessarily make teaching a less desirable profession, particularly for the most productive employees.

We are grateful to the Washington State Department of Retirement Systems and the Office of the Superintendent of Public Instruction for providing the confidential data used in this study. We also gratefully acknowledge the financial support of the Joyce Foundation and the Center for Analysis of Longitudinal Data in Education Research (CALDER), which is funded through Award #R305C120008 by the Institute of Education Sciences, US Department of Education. We also benefitted from input on early drafts of this paper from Wes Bignell, Annie Pennucci, Cory Koedel, Josh McGee, and James Cowan, and two anonymous reviewers. Any and all errors are solely the responsibility of the study's authors, and the views expressed are those of the authors and should not be attributed to their institutions, the study's funders, or the agencies supplying data.

Footnotes

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We are grateful to the Washington State Department of Retirement Systems and the Office of the Superintendent of Public Instruction for providing the confidential data used in this study. We also gratefully acknowledge the financial support of the Joyce Foundation and the Center for Analysis of Longitudinal Data in Education Research (CALDER), which is funded through Award #R305C120008 by the Institute of Education Sciences, US Department of Education. We also benefitted from input on early drafts of this paper from Wes Bignell, Annie Pennucci, Cory Koedel, Josh McGee, and James Cowan, and two anonymous reviewers. Any and all errors are solely the responsibility of the study's authors, and the views expressed are those of the authors and should not be attributed to their institutions, the study's funders, or the agencies supplying data.

M.DeArmond and D.Goldhaber (2010) Scrambling the nest egg: how well do teachers understand their pensions, and what do they think about alternative pension structures?Education Finance and Policy, 5(4): 558–586. doi: 10.1162/EDFP_a_00010.

D.Goldhaber, B.Gross and D.Player (2011) Teacher career paths, teacher quality, and persistence in the classroom: are public schools keeping their best?Journal of Policy Analysis and Management, 30(1): 57–87. doi: 10.1002/pam.